Rail Service Challenges and Higher Demand From Shippers Boost Secondary Market

This article has been reprinted from the March 7 USDA Grain Transportation Report.

Prices in the secondary railcar market for shuttle freight have continued to increase, rising well above-average in recent weeks (GTR Figure 4).

Average bids/offers for delivery of (shuttle) railcars in March rose from about $300 per car, as of February 7, to $2,000 per car, as of February 28.

A review of grain exports and rail service data suggest two factors could be at play:

(1) recent higher demand for grain rail transportation, and

(2) rail service delays due to weather problems.

Grain inspected for export in the Pacific Northwest and Texas Gulf, which are largely rail-supplied, was 143 million bushels in February, up 7 percent from the prior 3-year average (GTR Figure 15).

At the same time, multiple railroads have reported severe weather impacting their operations over the past month.

BNSF Railway and Union Pacific Railroad issued customer notices on March 1 and March 6, respectively, noting harsh winter weather conditions affecting rail operations.

Average grain train speeds, across all 7 Class I railroads, were 3 percent lower in February compared to January.

At the same time, average terminal dwell times were up 2 percent, while average grain origin dwell times were up 38 percent.